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EchoStar and Viacom reach agreement

March 12, 2004

EchoStar Communications and Viacom reached an agreement last week to end a dispute that, for almost two days, left nearly nine million subscribers of Dish Network’s satellite-television service without MTV, VH1, Comedy Central, BET, Nickelodeon and other Viacom-owned channels. To a lesser extent, CBS network programming was also affected in some areas.

Charles W. Ergen, EchoStar’s chief executive, announced the agreement without providing financial details of the new deal. “This agreement with Viacom allows Dish Network to remain the lowest-cost, all digital TV provider in the country,” Ergen said. “We understand that this has been a difficult few days for our customers, and we thank them for all the encouragement they have given us throughout.”

EchoStar’s Dish Network, the No. 2 U.S. satellite-television service, stopped carrying Viacom-owned channels last Tuesday when a contract between the two companies ran out after months of attempts to negotiate a new one. The shutdown left nine million Dish Network customers without 10 Viacom channels and 1.6 million customers without CBS content.

Within 20 minutes of reaching the agreement on Thursday, Viacom’s channels, were back on DISH, EchoStar spokesman Marc Lumpkin said.

EchoStar’s action affected CBS feeds only in cities where Viacom owns local network affiliates. Those include New York, Los Angeles, Chicago, Philadelphia, San Francisco, Miami, Boston, Denver, Minneapolis and Dallas.

EchoStar said Viacom’s demands for higher programming payments amounted to hundreds of millions of dollars. Viacom said the increase would be six cents a month per customer.

Viacom took out a full-page ad in major national newspapers last week that included telephone numbers for Dish Network customers to call to switch to cable or DirecTV, a Dish Network competitor.

EchoStar has also revealed it is the subject of an inquiry by the Securities and Exchange Commission that may require a restatement of its 2001 results. The inquiry is related to how EchoStar accounted for reserve funds for replacement smart cards intended to prevent theft of the satellite signal of its Dish Network.

The blackout was the largest disruption since 2000, when a similar dispute between Time Warner cable and ABC interrupted service to 3.5 million cable customers.